Kashkari, who oversaw the TARP program while at the Treasury Department in 2008 and later ran for governor of California, will take over for outgoing Minneapolis Fed president Narayana Kocherlakota early next year.

Kashkari, who worked at Goldman Sachs before his time at the Treasury and at Pimco afterward, doesn't have a traditional economics background, studying mechanical engineering as an undergraduate and later obtaining an MBA from Wharton.

Krugman's complaint, however, isn't with Kashkari's background, but rather with his already-public statements about the relationship between demand and supply.

Said another way, Krugman seems to think Kashkari has some basic economic principles backward.

Citing an exchange between Kashkari and UC-Berkeley economist Brad DeLong, Krugman says he is irked by Kashkari's assertion that the economic growth seen in the run-up to the housing-bubble-induced financial crisis wasn't "real."

Kashkari called growth in this period "artificially fast" because of the increased leverage taken on by businesses and consumers during that period. This debt, of course, was a big part of why the financial crisis was so severe and why the recovery has been so tepid as the economy — particularly households — has been forced to undergo a massive deleveraging.

Neel Kashkari.
REUTERS/Stephen Lam
But Krugman writes: "'artificially' is the real telltale, as is Kashkari's description of Japanese monetary stimulus as 'morphine.' It's straight out of the liquidationist playbook, e.g. Hayek denouncing the use of 'artificial stimulants' to fight the Great Depression."

That is, Krugman sees Kashkari as someone who views Fed intervention in the economy as creating something that isn't the true measure of economic growth. Or something like that.

So in writing that with Kashkari's appointment there is now a "liquidationist" in a senior Fed position, Krugman is bemoaning that someone who thinks the economy would have been better served by, say, letting big banks fail and allowing "the system" to flush out bad assets has been given such a significant voice at the Fed.

That more failure or "flushing out" in the economy is what we really needed after the financial crisis is the favored counterfactual from folks who think the Federal Reserve either did or has continued to overstep its bounds by buying up massive amounts of assets and keeping interest rates near 0% after the financial crisis.

And this view, which is anathema to Krugman, is something he thinks Kashkari is more sympathetic with.

For his part, Krugman would never be caught arguing that Fed policies created something that wasn't "real" in the economy. Nor is Krugman likely to be caught arguing that Fed policy has gone too far or has been harmful following the worst economic period since the Great Depression.

And as recently as Friday, Krugman argued that though the labor market appeared to be hitting some of the Fed's "full employment" objectives, the Fed should be more cautious in raising rates because inflation remained below the Fed's 2% target.

Following Kashkari's appointment, Neil Dutta, an economist at Renaissance Macro, said Kashkari could be a more "hawkish" Fed president than average, meaning in Dutta's view Kashkari could be disposed to vote in favor of more aggressive rate hikes or be more cautious to cut rates in the event of future economic troubles.

But in Krugman's view, Kashkari could be something far worse.

We'd note that Kashkari isn't a voting member of the Federal Open Market Committee, the Fed committee that votes on interest-rate policy, until 2017, and so there's some time to hear Kashkari's public speeches to get a better feel for his economic views.

But the morning-after take on Kashkari's appointment from the country's most public economist is that this is a step backward for the Fed.